NEW YORK — One Price Clothing Stores, a chain of off-price apparel and accessories specialty retail stores, said it has entered into an exclusive nonbinding letter of intent with an unidentified party for a “substantial” investment in the firm.
However, in a Form 10-K annual report filed with the Securities and Exchange Commission, the Duncan, S.C.-based firm, which operates 581 stores, said an independent auditors’ report indicated there is mounting concern the firm may not be able to continue operations because of recurring losses and its negative working capital position.
In addition, the company warned that if current sales trends continue in the second quarter, historically its biggest source of sales and profits, it might fall out of compliance with certain covenants in its loan facility with its primary lender.
“The company has incurred operating losses for the past three fiscal years and had a deficiency in working capital as of Feb. 1, 2003,” the 10-K read. “These factors, as well as the uncertain retail environment in which the company operates, have raised substantial doubt about the company’s ability to continue as a going concern.”
One Price and its prospective investors have completed a portion of required due diligence and expect any equity investment will close within the next 30 days.
In the year ended Feb. 1, One Price posted a net loss of $12.9 million, or $4.30 a diluted share, following a loss of $19.7 million, or $6.70, in 2001. Sales last year were $331.8 million, 2.5 percent below the 2001 mark, as same-store sales fell 2 percent. Last year, women’s apparel accounted for 54 percent of sales; plus-size women’s wear, 24 percent; children’s apparel and women’s accessories, 10 percent each, and other categories, 2 percent.